Lecture 2 Certainty of Subject Matter and Objects Flashcards
Palmer v Simmonds (1854)
Although usually the subject matter does not have to be identifiable until the point when the trust comes into effect and therefore the disposition of the residue of an estate is possible, the Testator’s will stating he wanted “the bulk” of his residuary estate to be held on trust was not sufficiently certain
Although usually the subject matter does not have to be identifiable until the point when the trust comes into effect and therefore the disposition of the residue of an estate is possible, the Testator’s will stating he wanted “the bulk” of his residuary estate to be held on trust was not sufficiently certain
Palmer v Simmonds (1854)
Re London Wine Co (1986)
SELF DECLARED TRUST:
Company which buys wine for people and keeps it in a warehouse- it does not specify which case belongs to which person- the compay goes insolvent and people then argue the wine belongs to them.
Held
no valid trust
to create a trust it must be possible to ascertain with certainty not only what the interest of the beneficiary is to be but to what property it is to attach
SELF DECLARED TRUST:
Company which buys wine for people and keeps it in a warehouse- it does not specify which case belongs to which person- the compay goes insolvent and people then argue the wine belongs to them.
Held
no valid trust
to create a trust it must be possible to ascertain with certainty not only what the interest of the beneficiary is to be but to what property it is to attach
Re London Wine Co (1986)
MacJordan Construction (1992)
Construciton contract where a property developer holds back a percentage of the money for the work of builders pending successful completion of the entire project. However, the employer mixed the money with their own funds and then go insolvent. The builder wants to argue that the remaining money is being held on trust as they want priority over unsecured creditors
Held
On the lines of Re London Wine Co
no trust as it was impossible to say which money in the account is trust money -> no segregation/identifiable asset meant no trust
note
there was no finding that the builder did not have a shared beneficial interest in the whole account- but the argument that since he owed 3% share he could claim a proportionate share was not brought forward and Lord Scott dicta seems to imply that this argument wouldve been rejected anyway- so it seems that Lehman Bros is a contradiction of this case
Construciton contract where a property developer holds back a percentage of the money for the work of builders pending successful completion of the entire project. However, the employer mixed the money with their own funds and then go insolvent. The builder wants to argue that the remaining money is being held on trust as they want priority over unsecured creditors
Held
On the lines of Re London Wine Co
no trust as it was impossible to say which money in the account is trust money -> no segregation/identifiable asset meant no trust
note
there was no finding that the builder did not have a shared beneficial interest in the whole account- but the argument that since he owed 3% share he could claim a proportionate share was not brought forward and Lord Scott dicta seems to imply that this argument wouldve been rejected anyway- so it seems that Lehman Bros is a contradiction of this case
MacJordan Construction (1992)
Hunter v Moss (1994)
Settlor declares trust for 50 out of 950 shares in the private company, but does not specify which.
HC: can be distinguished from Re London Wine as the complete fungibility of the block of share makes it irrelevant which shares should be identified for the purpose of giving effec to the trust.
CA: this is a valid trust. Dillon LJ’s reasoning is very shaky- distinguishes from London Wine by arguing that that case was a case concerning chattels in which legal title was meant to pass quickly. Draws an unconvincing analogy between inter vivos and testamentary trusts
difficult to make out whether MacJordan will still be applied- seems like with bank accounts this is the only possible solution
Briggs J in Lehman Bros supports the judgement on different grounds
and there seem to be no objection in grounds of uncertainty
Settlor declares trust for 50 out of 950 shares in the private company, but does not specify which.
HC: can be distinguished from Re London Wine as the complete fungibility of the block of share makes it irrelevant which shares should be identified for the purpose of giving effec to the trust.
CA: this is a valid trust. Dillon LJ’s reasoning is very shaky- distinguishes from London Wine by arguing that that case was a case concerning chattels in which legal title was meant to pass quickly. Draws an unconvincing analogy between inter vivos and testamentary trusts
difficult to make out whether MacJordan will still be applied- seems like with bank accounts this is the only possible solution
Briggs J in Lehman Bros supports the judgement on different grounds
and there seem to be no objection in grounds of uncertainty
Hunter v Moss (1994)
Goldcorp Exchange (1995)
People buy gold bars for investment purposes and the holder of legal title does not segregate. After insolvency, C argue that legal title was transferred, or alternatively that there was a trust in their favour. Note that in this case there was a shortfall in the end ie not enough gold to satisfy the rights of all the beneficiaries.
Lord Mustill- neither legal nor equitable title to property can be acquired unless it can be clealry identified. The certainty of subject matter is not a technicality, but a consequence of the very nature of things.
People buy gold bars for investment purposes and the holder of legal title does not segregate. After insolvency, C argue that legal title was transferred, or alternatively that there was a trust in their favour. Note that in this case there was a shortfall in the end ie not enough gold to satisfy the rights of all the beneficiaries.
Lord Mustill- neither legal nor equitable title to property can be acquired unless it can be clealry identified. The certainty of subject matter is not a technicality, but a consequence of the very nature of things.
Goldcorp Exchange (1995)
Pearson v Lehman
Arose out of insolvency out of Lehman Bros- parties had a system where LB, acting as a hub for the buying and selling of shares and other securities for all affiliate companies, would acquire rights from third parties on behalf of the affiliates and hold them on trust. There was a question over whether there was a valid trust, since T was also free to use the securities for its own benefit in the intermediary period; it was argued there was no certainty, as T’s ultimate duty related purely to the number and type of securities and not to any specific property held.
Briggs J: There is a valid trust. Interprets Hunter v Moss - a trust of part of a fungible mass does not fail for uncertainty of subject matter provided that B’s proprotionate share is nto itself uncertain. The proper way to analyse this is that there is a beneficial co-ownership share in the identified fund. Justifies the outcome by reference to the importance upholding the parties’ intentions.
Arose out of insolvency out of Lehman Bros- parties had a system where LB, acting as a hub for the buying and selling of shares and other securities for all affiliate companies, would acquire rights from third parties on behalf of the affiliates and hold them on trust. There was a question over whether there was a valid trust, since T was also free to use the securities for its own benefit in the intermediary period; it was argued there was no certainty, as T’s ultimate duty related purely to the number and type of securities and not to any specific property held.
Briggs J: There is a valid trust. Interprets Hunter v Moss - a trust of part of a fungible mass does not fail for uncertainty of subject matter provided that B’s proprotionate share is nto itself uncertain. The proper way to analyse this is that there is a beneficial co-ownership share in the identified fund. Justifies the outcome by reference to the importance upholding the parties’ intentions.
Pearson v Lehman
IRC v Broadway Cottages Trust
Certainty of Objects - fixed trusts
HOL
Complete List test- a fixed trust is valid with respect to certainty of objects where it is possible to draw up a complete list of the beneficiaries. This has been held on the basis that the accepted test for the validity of the trust is that it must be such that the court can control it.
Note that this was a discretionary trust case, but has been superseded in discretionary trust context by Re Baden’s No 1 and accordingly now only applies to fixed trusts,
Certainty of Objects - fixed trusts
HOL
Complete List test- a fixed trust is valid with respect to certainty of objects where it is possible to draw up a complete list of the beneficiaries. This has been held on the basis that the accepted test for the validity of the trust is that it must be such that the court can control it.
Note that this was a discretionary trust case, but has been superseded in discretionary trust context by Re Baden’s No 1 and accordingly now only applies to fixed trusts,
IRC v Broadway Cottages Trust
Re Gulbenkian’s ST
Where there is a mere power, it is not necessary to be abel to draw up a complete list- the relevant test is whether it is possible to tell whether any given individual is a member of the class (in or out test). The court rejected the view of Lord Denning MR in the court of appeal that, int he caes of the power, it is only necessary to show that any one person is clearly within the class (this is the rule with relation to gifts subject to condition precedent- see Re Barlow’s WT). Lord Upjohn notes that the trustees have a duty to select from among the whole class, not merely those known to C becuase this constitutes a narrower class which is contrary to the donor’s wishes.
